Tom Perkins and Schadenfreude in Silicon Valley

On Saturday, Tom Perkins, a founder of one of Silicon Valley’s most prominent venture-capital firms, wrote a letter to the Wall Street Journal comparing the “progressive war” he thinks is being waged against wealthy Americans to the Nazis’ persecution of Jews. It wasn’t the first time someone had made the comparison, but it was among the most bizarre. “Kristallnacht was unthinkable in 1930; is its descendent ‘progressive’ radicalism unthinkable now?” Perkins asked, and described the form this progressive war has taken: for one thing, people seem outraged about rising real-estate prices, he wrote. For another, someone called Danielle Steel a “snob.” (The San Francisco-based romance novelist is Perkins’s ex-wife, though he didn’t mention this in the letter. The insult against her appeared in a column by the San Francisco Chronicle’s C. W. Nevius, about a Berlin Wall-like hedge surrounding Steel’s house.)

The letter was controversial, unsurprisingly, and Perkins took to Bloomberg TV on Monday evening to defend himself. “Most Germans had never met a Jew, and yet Hitler was able to demonize the Jews, and Kristallnacht was one of the earlier manifestations. But there had been others before it, and then, of course, we know about the evil of the Holocaust. I guess my point was that, when you start to use hatred against a minority, it can get out of control,” he said. There were lighter moments, too, as he announced that his watch was worth a “six-pack of Rolexes,” proclaimed that he defended Steel because he is a “literal knight” (in Norway, apparently), and said that the poor and middle class have “threatened” the rich with their calls for a more equal society.

More interesting than Perkins’s letter or his TV appearance, though, has been the response in Silicon Valley. He is right that serious class tension has been simmering in the area. Well-compensated tech workers have been steadily moving there for several years now, pushing rents and real-estate prices up and displacing longtime residents. But the anxiety has become especially palpable, over the past year, in San Francisco, as Twitter and other newly public companies have turned thousands of employees who live there into millionaires. San Francisco County and its northern and southern neighbors, Marin and San Mateo Counties, have the most millionaires, as a proportion of population, in the entire state. At the same time, the poverty rate in San Francisco County is among California’s highest. The private buses that take tech workers to their Silicon Valley jobs have become a potent symbol of the advantages the rich enjoy. Demonstrators have smashed a bus-shaped piñata in effigy andused their bodies to block shuttles, keeping them at a standstill. “Maybe we should call San Francisco Google-land,” a seventy-four-year-old mantold the board of the city’s transit agency last week, at a meeting about the buses.

Soon after the Journal printed Perkins’s letter, the company he co-founded, Kleiner Perkins Caufield & Byers, distanced itself. “Tom Perkins has not been involved in KPCB in years,” the firm wrote on Twitter. “We were shocked by his views expressed today in the WSJ and do not agree.” (Perkins, in the Bloomberg TV interview, said the firm had chosen “to sort of throw me under the bus,” and followed up with his own jab: “As I’ve distanced myself from the firm, there’s been a corresponding decline in the firm.”) A couple of prominent Silicon Valley investors chimed in: “I wish to express my extreme displeasure with Tom Perkins,” the Netscape co-founder and venture capitalist Marc Andreessen tweeted. “His positions just go to prove that he is the leading asshole in the state.” Hunter Walk, another investor, wrote, “You know, one could see this as Perkins’ greatest gift -> uniting the 1% & 99% in outrage against his oped. Let the healing begin.”

Has Perkins’s letter really brought the super-rich together with everyone else? The media has covered the story aggressively—Bloomberg, the Times, and even the Journal itself weighed in. Julia Ioffe, of The New Republic, wrote an entire piece about a novel Perkins wrote, in 2006, called “Sex and the Single Zillionaire,” from which Ioffe cites several Steel-y excerpts. (“The view from his 47th-floor penthouse was as spectacular as ever. Five years ago, he’d closed the big house on Long Island and moved into this sleek, ultra-modern, minimalist, yet somehow very comfortable, glassed and terraced condominium. It had taken five years to hunt down and buy a fortune’s worth of contemporary art, paintings and sculptures to furnish the penthouse.”)

Within Silicon Valley’s venture-capital firms themselves, though, the response has been somewhat muted. In articles about the dustup, reporters looking to quote Silicon Valley types who disagree with Perkins have mostly repeated the comments from Andreessen, Walk, and a small handful of others. Certainly, no one is obliged to speak out against Perkins’s comments; the world faces more important crises than the off-putting ramblings of a Silicon Valley elder. But there are few things tech leaders love more than to comment in real time on the little scandals of their little universe. So why the relative silence on this one?

Many seem to agree that it’s tasteless at best, and deplorable at worst, to compare protests over inequality with Nazi persecution. Yet it’s worth noting that the interests of many venture capitalists are more aligned with Perkins than with the people he compares to Nazis—the piñata-smashing, bus-stopping protesters. These protesters want the city to require more community investment—and under more binding terms—from the tech companies that benefit from San Francisco’s tax breaks. They want the city to charge the companies significant fees for using public bus stops for their private shuttles, and to make it easier for lower-income people to stay in their homes. Such changes might well be good for lower-income San Francisco residents, but they could be costly for San Francisco-based, venture-capital-backed startups.

I covered Silicon Valley for the Wall Street Journal for several years, and I met a lot of investors and entrepreneurs who emphasized how they were improving the world with their wealth. Indeed, it’s important to note that some of Silicon Valley’s most affluent people frequently make generous philanthropic gifts, including ones to charities focussed on poverty and inequality in the Bay Area. In 2013, the C.E.O. of Facebook, Mark Zuckerberg, and his wife, Priscilla Chan, made the largest single donation in the country when they gave almost a billion dollars to the Silicon Valley Community Foundation. In 2012, Zuckerberg and Chan were the second-most-generous contributors to charity in the country after Warren Buffett, according to the Chronicle of Philanthropy. The Google co-founder Sergey Brin and his wife, Anne Wojcicki, came in fifth. (Perkins told Bloomberg TV, “I give and have given and will give millions and millions of dollars to a long list of charities.”) But individual acts of generosity aren’t likely to right the structural imbalance between the rich and the poor.

When asked on Bloomberg TV what should be done to improve the lives of “the ninety-nine per cent,” Perkins said, “I think that the solution is less interference, lower taxes, let the rich do what the rich do—which is get richer, and along the way they bring everybody else along with them, when the system is working.” That Reaganite notion—that, if you give rich people more money, it’ll trickle down—can be debated. Still, Perkins has a point: Silicon Valley companies have created a huge number of jobs in the region, helping San Francisco and the surrounding counties achieve some of the lowest unemployment rates in California. And yet, for the most part, those jobs have gone to highly educated, well-compensated workers, not to the lower-income people who have had the hardest time emerging from the recession. The system, clearly, is not working.

Other than Andreessen, the most prominent investor who has spoken out about Perkins’s comments is Tim Draper, the founder of the venture-capital firm Draper Fisher Jurvetson. He defended Perkins. On Monday, before Perkins’s TV interview, Drapertold Business Insider:

On Tom Perkins, he is a brilliant man, and he is identifying schadenfreude, something that continues to be a thorn in humanity’s side. The bitter taste of envy brings us all down. I like to celebrate the wealth and success of great heroes like Sergey Brin, Larry Page, Mark Zuckerberg, Bill Gates, Steve Jobs, Elon Musk, and Larry Ellison. I think it makes us all better to strive to be better and brighter … and I like a good bus.

Draper’s response reveals an insidious aspect of the tension between the rich and the poor, in Silicon Valley and elsewhere. Some seem to believe that the fuss over the wealth gap can be boiled down to a childish resentment on the part of the less fortunate—schadenfreude, envy. Certainly, that’s part of it: Who can deny that the piñata-hitting episode was a little babyish? But it’s about more than that. The American Human Development Project, part of the Social Science Research Council, has tracked the life expectancy of California residents based on where they live. Since the tech boom, many of San Francisco’s poor have been pushed to surrounding areas, like Oakland and Richmond, in the East Bay. People living in parts of San Francisco can expect to live, on average, up to ten years longer than people in parts of the East Bay—just a bus ride away.

CORRECTION: In an earlier version of this piece, I wrote that a resident of San Francisco can expect to live about ten years longer than a resident of some parts of the East Bay, citing the Federal Reserve Bank of San Francisco. The life-expectancy figures used for San Francisco, and for East Bay Zip Codes, came from two different data sets used in separatereports by the Federal Reserve Bank of San Francisco. The report cited in this version, by the American Human Development Project of the Social Science Research Council, uses a single data set.

Photograph: Steve Jennings/TechCrunch/Getty

Vauhini Vara, the former business editor of newyorker.com, lives in San Francisco and is a business and technology correspondent for the site.